Can we afford - conversely benefit more from - a widely

diverging mix of models?

Thomas Kleefuß

Managing Director and CEO

EAGC, Vienna – 13. Nov. 2012

What is the best TSO model for Europe?

A role model for Europe

Targets of the European gas market

Conclusion

Products and developments

AGENDA

3

Functional gas market

Criteria:

Zone with one market price for the same product at the same time at

the same place (single price zone), creating reliable price signals for

forward and spot markets

Freely accessible for traders, suppliers on equal terms

Liquid trading (ability to quickly buy or sell reasonable volumes of gas

without causing a significant change in prices and without incurring

significant transaction costs)

Minimal Requirements:

Fully implemented E/X-Systems (see also next pages), ideally equipped

with

uncongested entries with a certain part of surplus capacity

free allocatable entries and exits

trade possible via a gas exchange and OTC

Sufficient demand (> 20 bcm/year of final customer consumption)

Connection to at least 3 different/independent gas sources

EAGC, Vienna – 13.11.2012

Overview

Current European Capacity Platforms No. Platform Involved TSOs Platform and Capacity Concept Products

1. GUD

GTS

Energinet.dk

Central agent (= GUD)

Individual contract with each

TSO (= multi contract bundled

capacities)

Primary capacities

Firm day-ahead capacities

GTS<>GUD, GUD<>ENDK,

GTS<>ENDK

2. GUD

GTS

Central agent (= GUD)

Individual contract with each

TSO (= non-bundled and multi

contract bundled capacities)

Primary capacities

Interruptible day-ahead and

“working days next week”

capacities (GUD<>GTS)

3. Fluxys

GRTgaz

OGE

Central agent (= Fluxys)

Individual contract with each

TSO (= multi contract bundled

capacities)

Primary capacities

Fluxys-GRTgaz (month)

Fluxys-OGE (day-ahead)

Secondary market for Fluxys and

GRT capacities (various tenures)

4. German

national

platform

All German

TSOs

Central agent (= TRAC-X)

Individual contract with each

TSO (= non-bundled and multi

contract bundled capacities)

Primary capacities

Auctions: Day-ahead, monthly,

quarterly, yearly products

FCFS booking: various tenures

Secondary market

5. ONTRAS

NET4GAS

GRTgazD

eustream

oTSO concept

Single contract bundled capacity

Primary capacities

day-ahead capacity

VTP CZ <> GASPOOL (ONTRAS):

firm and interruptible)

VTP CZ <> NCG (GRTgaz D):

VTP CZ <> VTP SK and CEGH

Baumgarten A

Capacity Allocation –

The Regulators’ View

Cross-Market Capacities

FWG CAM “apply to cross-border interconnection

points, ..., ... as well as to interconnection points

between entry-exit-systems ...” (Chapter 1.2)

Single Platform

“The network code(s) shall lay down an action

plan to reduce the number of platforms and

eventually establish a single EU-wide platform.”

(Chapter 3.3).

Bundled Capacity Services

“... on the basis of a single allocation procedure

and a single nomination.” (Chapter 2.4.1)

What`s left to be a TSO ?

The Austrian “Marktgebietsmanager”

The “Marktgebietsmanager – MGM” (market area manager) is not a TSO but an

additional entity co-operating with all Austrian TSOs.

The responsibilities of the market area manager due to the Austrian Gas Act

(draft submitted to parliament) include:

Coordination of the grid control and the utilization of the linepack

Purchase, sale, and optimization of balancing energy by using the VTP

Organizing the settlement of balancing energy

Elaboration of unique calculation schemata for capacity calculation at each

E/X point

Organization the establishment and operation of the online platform for

capacity sale

10 years capacity forecasts and development of ten year network

development plan

Elaboration of the ten years network development plan

Coordination of measures in order to handle bottlenecks in cooperation with

TSOs, DSOs, and SSOs

Signing contracts about data exchange with all market participants

Coordination of maintenance work

The Central Agent Model

for one or more countries / markets

TSO 1 TSO 2

Shipper

?

capacity requests, re-/nominations

capacity contracts

capacity requests, nomination, billing, …

Regional System OperatorRSO

Central CapacityMarketing Entity

(Quasi RSO*)

Shipper

Central Agent(“platform operator”)

TSO 1 TSO 2

The GATRAC Concept

The oTSO concept does not need any central entity

The only parties acting towards the shippers are the TSOs themselves

All TSOs can assume the oTSO role, also none of the TSOs is likely to

evolve to the single capacity marketer.

In order to establish the oTSO as a one-stop-shop equivalent from a

shipper’s perspective to a central agent operating a capacity platform,

capacity contracts

capacity requests, nomination, billing, …

Shipper 1

Single

contract

bundled

capacity 1

TSO 2TSO 1

(oTSO forShipper 1) Inter-TSO

processes

Inter-TSO

booking

Shipper 2

TSO 2(oTSO forShipper 2)

TSO 1

Single

contract

bundled

capacity 2

Inter-TSO

processes

Inter-TSO

booking

All TSOs can act as oTSO (if they wish)

http://www.gatrac.com

F-BD9

“GATRAC” Bundled Hub-to-Hub products

with a single contract

cross border gas transports can be met rather quickly by expansion of the GATRAC

Benefits:

No need to amend legal framework if national legal rules are not mandatory for cross border capacities

Similar procedures and contracts for all routes

Compatible with TRAC X

VTP

PEG

TTF

CEGH

NCG

current scope of cooperation

possible future routes

VP

Conclusion:

The TSOs will play a stronger role with higher

entrepreneurial incentives

Less than 50 TSOs should be able to manage a single contract model easily if liabilty rules are harmonized between TSOs and towards shippers in EU, Risks are limited between TSOs due to financial strength

The market forces will drive efficiency and innovation of TSOs faster than regulation or market operators, because

- TSOs will not be segreagted from market and it´s participants- A segregation from technical and commercial skills will have

adverse consquences - asset development will not be unbundeld from product

development

TSO consolidation can create greater value in particular due to best practice transfer and cross border harmonization i.e. (Gasunie GTS and GuD)

Additional players like market operators etc. have their ownagenda and complicate processes

Thank you for your attention!

Connecting Markets

Vienna, November 13th 2012